What is business insurance?
Business insurance is any insurance that covers a loss that can be incurred throughout the process of running a business that does not relate directly to business practices. Many forms of business insurance, therefore, will pay out in the event of a disaster which prevents trading, for example, but would not pay out money in order to shore up losses which come about as a result of poor business practices.
Business insurances also cover things that could take place within a business to impede its progress that arise from human error or malfeasance, but are not part of general business practice. For example, one might take out insurance against a business’ employees or customers stealing from or intentionally damaging property of the business. Although one could sue for damages, in the short term you would still need liquid capital for your business to run, and this insurance is where you would get it from.
If your business uses vehicles, for example if you made deliveries, or if you had a company car for any of your employees, you would need to purchase motor insurance as well. You can get specialised insurance for business cars.
Directors’ and officers’ insurance
When running a business, there are many things your directors and officers – such as the chief financial officer, chief executive officer and chief operating officer – have as responsibilities. This means that they have great power over the running of the company, but are also culpable for some things that could go wrong in the business.
Directors’ and officers’ insurance is set up to provide money in the event that the directors or the officers are accused of acting inadvertently outside of their purview or their terms of reference. This insurance will provide money for legal costs that may be incurred in setting up a legal defense in court over any such allegations.
In the event that they are discovered to have violated their terms of reference inadvertently, then this insurance will also provide compensation to the directors or officers found guilty.
It should be noted that this insurance will only pay out if the violation is not an intentional one on the part of the directors. This is to ensure that no-one will attempt to act in a way which is damaging to the business and then become compensated for it. If the acts are deliberate, you will need to pay for the costs yourself, and will have no compensation.